Doing Business Should Stop Promoting Tax Competition

The World Bank Group recently released Doing Business 2017: Equal Opportunity for All, the latest version of its flagship report, which encourages countries to reduce regulatory burdens on the private sector. But there is a serious flaw in the report’s formula: its treatment of corporate taxation.

NEW YORK – The World Bank Group has just released Doing Business 2017: Equal Opportunity for All, the latest version of its flagship report. According to the Bank, the annual report is one of the world’s most influential policy publications, as it encourages countries to reduce the regulatory burden on the private sector. But there is a serious flaw in the report’s formula: the way it treats corporate taxation.

Doing Business reports rate 11 areas of business regulation in 190 countries, using data on compliance burdens collected by PricewaterhouseCoopers (PwC). The Bank then formulates an overall score that supposedly reflects the ease of conducting commercial activities, and ranks countries according to that score. The lower the regulatory burden on businesses, the higher a country ranks.

The problem is that “regulatory burden,” according to Doing Business, includes the collection of taxes that are necessary to fund public infrastructure and basic social services – both of which are critical to enhance growth and employment. Even the report recognizes that, for most economies, taxes are the main source of the government revenues needed to fund “projects related to health care, education, public transport, and unemployment benefits, among others.”

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The points made here have always been true but are more urgent than ever at a time when capital flows have emerged as a destabilizing economic (and political) force. To promote tax competition, rather than tax cooperation and international coordination under current conditions, is just irresponsible.

Seems to me, not for the first time, that PwC need to decide if they are a gamekeeper or a poacher. Often they appear like Wurzel Gummidge - who had a variety of different skilled heads to put on his scarecrow body - to put whatever head on suits the day

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